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Income Taxes
9 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Note 3—Income Taxes
On December 22, 2017, the U.S. government enacted The Tax Cuts and Jobs Act (“The TCJA”) which includes significant changes to the taxation of business entities. These changes include, among others, (1) a permanent reduction to the corporate income tax rate, (2) a partial limitation on the deductibility of business interest expense, and (3) a shift of the U.S. taxation of multinational corporations from a tax on worldwide income to a quasiterritorial system (along with certain rules designed to prevent erosion of the U.S. income tax base).
Effective January 1, 2018, the Company is subject to several provisions of The TCJA including computations under Global Intangible Low Taxed Income (“GILTI”) and Foreign Derived Intangible Income (“FDII”). For the GILTI and FDII computations, the Company recorded tax expense using the current available regulations and the technical guidance on the interpretations of The TCJA. The Company has recorded the impacts of The TCJA in its effective tax rate for the three and nine months ended September 30, 2019 and has elected to treat taxes due on future U.S. inclusions in taxable income related to GILTI using the period cost method.
On June 21, 2019, the Internal Revenue Service issued final regulations relating to the GILTI and foreign tax credit provisions of the TCJA and proposed GILTI regulations for high-tax exception. The Company has evaluated the impact of the final and proposed GILTI regulations and concluded they were not material to the financial statements. The Company will continue to monitor the technical guidance of the proposed GILTI regulations.
The Company will continue to monitor the forthcoming regulations and additional guidance of the FDII and Base Erosion and Anti-Abuse Tax (“BEAT”) provisions under the TCJA, which are complex and subject to continuing regulatory interpretations.
The amount of unrecognized tax benefits included in the Consolidated Balance Sheets increased $1.9 million in the nine months ended September 30, 2019, from $18.8 million at December 31, 2018 to $20.7 million at September 30, 2019. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $20.7 million at September 30, 2019. Although the timing of the resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of gross unrecognized tax benefits could significantly change in the next 12 months. Given the number of years remaining subject to examination and the number of matters being examined, at this time, the Company is unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. The amount of interest and penalties accrued in tax expense for the nine months ended September 30, 2019 increased by $0.5 million, from $0.5 million at December 31, 2018 to $1.0 million at September 30, 2019.